UK student loan repayments are deducted automatically from your salary through PAYE — many graduates don't even notice them until they check their payslip. But understanding which plan you're on and how repayments work can help you make better financial decisions, especially around voluntary overpayments.
Which Plan Are You On?
Your student loan plan depends on when and where you studied:
| Plan | Who it applies to | 2025/26 Threshold | Rate |
|---|---|---|---|
| Plan 1 | Started before Sep 2012 in England/Wales; most Scottish/NI students | £24,990 | 9% |
| Plan 2 | Started on/after Sep 2012 in England/Wales | £27,295 | 9% |
| Plan 4 | Scottish students (undergrad loans from SAAS) | £31,395 | 9% |
| Plan 5 | Started on/after Aug 2023 in England | £25,000 | 9% |
| Postgrad | Masters/PhD loans from Aug 2016 in England/Wales | £21,000 | 6% |
How Repayments are Calculated
Repayments are 9% of earnings above your threshold — not 9% of your total salary. This is an important distinction.
Plan 2 example: £40,000 salary
Repayment: (£40,000 − £27,295) × 9% = £12,705 × 9% = £1,143.45/year (£95.29/month)
Plan 2 example: £60,000 salary
Repayment: (£60,000 − £27,295) × 9% = £32,705 × 9% = £2,943.45/year (£245.29/month)
Interest Rates
Interest rates differ significantly by plan and can dramatically affect whether your loan is worth overpaying:
- Plan 1: Lower of RPI or Bank of England base rate + 1% (currently around 4.3%)
- Plan 2: RPI + up to 3% while studying; RPI + 0–3% depending on income once earning (currently capped due to RPI spike). Currently around 7.3% for higher earners.
- Plan 4: RPI rate (currently around 4.3%)
- Postgraduate: RPI + 3% (currently around 7.3%)
Write-Off Periods
One of the most important features of UK student loans is that outstanding balances are written off after a set period, regardless of how much you owe:
- Plan 1: Written off at age 65, or 25 years after repayments started (whichever is sooner)
- Plan 2: Written off 30 years after you were first due to repay
- Plan 4: Written off at age 65, or 30 years after first due (whichever is sooner)
- Plan 5: Written off 40 years after first due to repay
- Postgraduate: Written off 30 years after first due to repay
Should You Make Voluntary Overpayments?
This is the most contested question in personal finance for UK graduates. The answer depends heavily on which plan you're on and your expected lifetime earnings.
For Plan 2: Research consistently shows that only the highest earners will repay their full loan within 30 years. For the majority of graduates, the loan is written off with a significant balance remaining — meaning overpayments are wasted money for those people. Unless you expect to earn comfortably over £60,000+ throughout your career, overpayments are usually not financially optimal.
For Plan 1 and Plan 4: With lower interest rates and shorter write-off periods, the maths is different. Higher earners on these plans may benefit from overpaying.
The key question: "Will I repay this loan in full before it's written off?" If the answer is no, overpaying is a donation to the government, not debt reduction.